Optimal contracting with moral hazard and behavioral preferences

JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS

卷:428

Article

Chang, Hualei^1,2  Cvitanic, Jaksa³  Zhou, Xun Yu^1,2 

[1] Univ Oxford, Math Inst, Oxford OX2 6GG, England

[2] Univ Oxford, Oxford Man Inst Quantitat Finance, Oxford OX2 6GG, England

[3] CALTECH, Pasadena, CA 91125 USA

关键词: Principal-agent problem;    Cumulative prospect theory;    Contracts;    Moral hazard;    Control;    Backward stochastic differential equation;   

DOI  :  10.1016/j.jmaa.2015.03.027

来源: Elsevier

【 摘 要 】

We consider a continuous-time principal-agent model in which the agent's effort cannot be contracted upon, and both the principal and the agent may have nonstandard, cumulative prospect theory type preferences. We find that the optimal contracts are likely to be more nonlinear than in the standard case with concave utility preferences. In the special case when the principal is risk-neutral, we show that she will offer a contract which effectively makes the agent less risk averse in the gain domain and less risk seeking in the loss domain, in order to align the agent's risk preference better with the principal's. (C) 2015 Elsevier Inc. All rights reserved.

【 授权许可】

Free